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Bloomberg: Shell Fourth-Quarter Profit Climbs on High Oil Price (Update1)

By Fred Pals and Stephen Voss

Feb. 1 (Bloomberg) — Royal Dutch Shell Plc, Europe’s biggest oil company, reported fourth-quarter profit climbed 21 percent as higher crude prices outweighed production losses in Nigeria.

Net income increased to $5.28 billion from $4.37 billion in the year-earlier period, Shell, based in The Hague, said today in a PRNewswire statement. Profit excluding one-time items and changes in inventory values was $5.5 billion, beating the median estimate in a Bloomberg survey of nine analysts.

Chief Executive Officer Jeroen van der Veer is struggling to boost production and reserves as militant violence against Shell’s Nigerian operations eroded output and the company gave up half its stake in a Russian oil and gas venture. Oil prices in New York averaged more than $66 a barrel last year, a record.

Shell’s B class shares yesterday slipped 0.6 percent to 1,706 pence. Those shares lost 3.7 percent last year.

Oil prices in New York ended the year at $61.05 a barrel, 22 percent below a record $78.40 on July 14 and 1 cent higher than a year earlier. From the end of 2001 through 2005, crude prices more than tripled.

Climbing oil prices had allowed Van der Veer to boost Shell’s exploration budget last year, though rising labor and equipment costs have eaten into that spending power.

CCS Profit

Excluding inventory changes, profit in the quarter rose 11 percent to $6.02 billion, from $5.44 billion. Shell refers to that measure of profit as constant cost of supplies, or CCS.

Production in the fourth quarter rose 4.1 percent from a year ago to 3.65 million barrels of oil equivalent a day, Shell said. For all of 2006, production fell 1 percent to 3.47 million barrels a day. The company in July lowered its 2006 output forecast to 3.4 million barrels a day, from a range of 3.5 million to 3.8 million, citing losses in Nigeria.

In Nigeria, damage to facilities following attacks by militants have knocked between 160,000 and 170,000 barrels a day from Shell’s output, Van der Veer said Jan. 26.

Through exploration, Shell replaced 67 percent of its proven reserves in 2005, using U.S. Securities and Exchange Commission accounting standards. Van der Veer said in May that Shell’s original target of 100 percent replacement for 2004-2008 had become “less likely” because some projects have run into delays or won’t meet SEC criteria for proven reserves.

Sakhalin Venture

Shell in December gave up half of its stake in Russia’s Sakhalin-2 oil and gas venture to OAO Gazprom, which may reduce its proven reserves by some 500 million barrels, analysts including Daniel Barcelo at Banc of America Securities LLC estimated in December.

Of the 34 analyst recommendations monitored by Bloomberg, 19, or 56 percent, give Shell a “buy” recommendation, while 10 say “hold” and 5 advise “sell.”

Exxon Mobil Corp., the world’s biggest publicly traded oil producer, reports fourth-quarter profit later today. The Irving- Texas-based company may say per-share earnings fell 11 percent to $1.52, according to the average estimate of 17 analysts surveyed by Bloomberg.

London-based BP Plc, Europe’s second-largest oil company, reports earnings for the period on Feb. 6. It will probably say profit, excluding oil inventory changes and one-time items, slid 12 percent to $3.89 billion, according to nine analysts surveyed by Bloomberg.

ConocoPhillips, the first major oil company to report fourth- quarter earnings, on Jan. 24 posted its first profit decline in four years because fuel prices dropped. Net income slid 13 percent to $3.2 billion, the Houston-based company said.

Industry refining profit margins, or the gap between crude- oil costs and prices for gasoline and diesel, narrowed to $7.69 per barrel in the fourth quarter, from $10.99 a year earlier.

To contact the reporters on this story: Fred Pals in Amsterdam at [email protected] ; Stephen Voss in London at [email protected]

Last Updated: February 1, 2007 02:28 EST

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